April 6, 2010 / 2:55 PM / 9 years ago

Timeline: Greece's debt crisis

(Reuters) - Greek assets took a battering on Tuesday after newspaper reports cast doubt on Greece’s ability to make it through an April/May redemption period without turning to an EU/IMF bailout.

Here is a timeline of economic events in Greece since George Papandreou’s socialist PASOK party won a 2009 election.

November 2009 - The new government pledges in its 2010 draft budget on November 5 to save Greece from bankruptcy by cutting the budget deficit of 12.7 percent of GDP — more than double the previously announced figure — while keeping electoral promises to help the poor.

— A final budget draft on November 20 shows Greece aims to cut the deficit to 8.7 percent of GDP in 2010 to show EU partners and markets it is serious about restoring fiscal health.

— It also sees public debt rising to 121 percent of GDP in 2010 from 113.4 percent in 2009. EU 2010 forecasts on Greece are worse, with the deficit seen at 12.2 percent of GDP and national debt rising to 124.9 percent, the highest ratio in the EU.

— On December 8, Fitch Ratings, which had cut Greece to A- when the government revealed the higher deficit, cuts Greek debt to BBB+ with a negative outlook, the first time in 10 years a ratings agency has put Greece below the A investment grade.

— On December 14, Papandreou outlines policies to cut the budget deficit and try to regain the trust of investors and the EU.

— December 16 S&P cuts Greece’s rating to BBB+ from A-, saying austerity steps announced by Papandreou are unlikely to produce a sustainable reduction in the public debt burden.

— December 22 - Moody’s cuts Greek debt to A2 from A1, the third agency to downgrade Greece, but still two notches above that of Fitch and S&P. Spread between 10-year Greek and German Bunds tightens because downgrade less severe than expected.

January 2010 - Greece unveils a stability program on January 14 saying it will aim to cut its budget gap to 2.8 percent of GDP in 2012 from 12.7 percent in 2009. Unions protesting against the austerity plan announce strikes for February.

February 2010 - Papandreou says on February 2 the government will extend a public sector wage freeze to those making below 2,000 euros a month for 2010, excluding seniority pay hikes.

— On February 3 the EU Commission says it backs Greece’s plan to reduce its budget deficit below 3 percent of GDP by 2012 and urges Greece to cut its overall wage bill.

— Greece must refinance 54 billion euros in debt in 2010, with a crunch in the second quarter as more than 20 billion euros becomes due. A 5-year bond issue in January is five times oversubscribed but the government has to pay a hefty premium.

— A one-day general strike on February 24 against the austerity measures cripples Greece’s transport and public services.

— An EU mission to Athens with IMF experts delivers a grim assessment of the nation’s economy on February 25.

— Finance Ministry official says the inspectors anticipate Greece can cut the deficit by about 2 percentage points, short of a 4 percentage point target for 2010.

March 2010 - EU Economic Affairs Commissioner Olli Rehn asks Greece to announce further measures to tackle its budget crisis.

— New package of public sector pay cuts and tax increases passed by the government on March 5 to save an extra 4.8 billion euros. The measures include raising VAT by 2 percentage points to 21 percent, cutting public sector salary bonuses by 30 percent, increases in tax on fuel, tobacco and alcohol, and freezing state-funded pensions in 2010.

— Public and private sector workers strike on March 11.

— March 15, Euro zone finance ministers agree on a mechanism that will allow them to help Greece financially if needed, but reveal no details.

— March 18, Papandreou warns Athens will not be able to make deficit cuts if its borrowing costs remain high and may have to call in the IMF.

— March 19, European Commission President Jose Manuel Barroso urges EU member states to agree a standby aid package for Greece. Barroso says the 16 countries that share the euro currency should be ready to make coordinated bilateral loans.

— March 25, European Central Bank President Jean-Claude Trichet says that the ECB will extend softer rules on collateral, easing the risk of Greek institutions being cut off from funding at the end of this year.

— Euro zone leaders agree to create a joint financial safety net, with the IMF, to help Greece and to try to restore confidence in the euro. Under the accord, Athens will receive coordinated bilateral loans from other countries that use the euro and money from the IMF, but only if all states agree to the bailout and if it has exhausted its borrowing options. April 2010 - A top finance ministry on April 6 denies that Greece is seeking an amendment to the safety net agreement. Investors batter Greek assets before and after the denial.

— The 10-year Greek/German government bond yield spread widens to as much as 408 basis points, from 349 bps on April 1 and just above January’s high of 405 basis points. Greek bank stocks fall 3.1 percent.

— Five-year credit default swaps (CDS) — the price of insuring Greek debt — rose to 354,000 euros to protect 10 millions of government bonds, from 347,000 on April 2, according to CDS monitor CMA DataVision.

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